Stocks climbed last week as reassuring inflation data boosted investor hopes that the rate-hike cycle was nearing an end amid fresh economic data pointing to continued economic resilience. The Dow Jones Industrial Average rose 1.25%, while the Standard & Poor’s 500 picked up 2.58%. The Nasdaq Composite index gained 3.25% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 2.42%.1,2,3
Stock market momentum gathered steam last week, blowing past the 4,300 and 4,400 thresholds in the S&P 500–a remarkable feat considering the time it took to break the 4,200 resistance level. Optimism was high to begin the week, with expectations that fresh evidence of cooling inflation would provide the Fed room to pause on further rate hikes. The data cooperated as consumer prices rose 4.0% year-over-year (the lowest 12-month number in two years), and producer prices increased 1.1% from a year ago.4 The Fed’s “hawkish pause” briefly unsettled investors, but after some reassessment and aided by healthy economic data, stocks rallied before slipping on Friday as the market digested the week’s gains.
Federal Reserve officials kept rates steady at last week’s Federal Open Market Committee (FOMC) meeting. However, a majority of committee members indicated at least two more quarter-point rate hikes were likely before year-end.4 Fed Chair Jerome Powell commented that he saw progress in fighting inflation and that no decision was made regarding any future rate increase, saying that members will assess the economic impact of the cumulative rate hikes before the July 25-26 FOMC meeting.5 The Fed raised its 2023 economic growth forecast to 1%, up from its March forecast of 0.4%. The Fed also lowered its unemployment projection to 4.1% from its earlier estimate of 4.5%.6
1. The Wall Street Journal, June 16, 2023, 2. The Wall Street Journal, June 16, 2023, 3. The Wall Street Journal, June 16, 2023, 4. AP News, June 14, 2023, 5. CNBC, June 14, 2023, 6. CNBC, June 14, 2023